Economics discussion questions
1. In the circular flow model of the economy, what are the "leakages?" Define them.
2. In the circular flow model of the economy, what are the "injections?" Define them.
3. Explain why the leakages must equal the injections for the economy to be at equilibrium.
4. When looking at the circular flow model and the equilibrium condition of leakages equaling injections, what would be the effect on the economy if the following were true:
a. Investment spending = $2 billion
b. Government spending = $8 billion.
c. Taxes = $3 billion.
d. Savings = negative $2 billion
e. Imports = $12 billion
f. Exports = $1 billion
Here is just a sample of what you will find in the solution:
"Unlike savings that are voluntary, government imposes various taxes that reduce income available for household expenditures. Households who pay taxes for transfer payments experience a..."
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